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implement policies to address the situation. The natural
incentives in the privatesector would tend to accelerate,
ratherthanresolve,thecrisis.
There is an ongoing trend toward concentration of
incomethatisdrivenlargelybythecontinuingadvanceof
automation technology and globalization, and also by a
lackofprogressivetaxpolicies.Manypeoplemightargue
thatincreasingincomeinequalityiscausedprimarilybya
“skillpremium.”Inotherwords,inthemodern,technolo-
gicaleconomy,peoplewhoarehighlyeducatedandskilled
haveasignificantadvantageinthelaborforce.Whilethis
hasbeentruesofar,itislargelybecauserelativelylowskill
jobshavebeenthefirsttobeautomatedandalsothefirstto
besubjectedtothefullforceofglobalization.Aswesaw
in Chapter 2, advancing automation technology will in-
creasingly threaten highly paid knowledge workers with
collegeeducations.Thesejobswillalso,ofcourse,besub-
jecttooffshoring.Clearevidenceofthesetrendsisalready
apparentininformationtechnology(IT)jobs,andwecan
expectthistobecomemuchmorebroad-basedinthefu-
ture.Wecanexpect that income will becomeevenmore
concentratedinthehandsofthosewhoarepositionedto
benefitdirectlyfromtheincreasingvalueoftechnological
capitalrelativetolabor.
Extremeincomeinequalityisgenerallypresentedasa
socialproblemoranissueofbasicfairness.Whileitmay
be these things, it isalso—more critically—a mathematical
problem in terms of the viability of the mass market.

Whenpurchasingpoweristakenfromthousandsofaver-
ageconsumersandconcentratedinthehandsofoneweal-
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thy individual, that purchasing power is effectively steri-
lized:itno longerplaysavibrantroleingeneratingmass
market demand for products and services. As we have
seen, this will ultimatelycause the market “river” to run
dry.
WeoftenhearthatincomeintheUnitedStatesisto-
day moreconcentrated than atany time sincethe 1920s.
The reality is that the risks from this concentration are
probablyevenhigher today becausethe rise ofthemass
market has changed the nature of our economy. Today,
virtually everyone in industrialized society—including es-
pecially the most wealthy individuals—derives his or her
incomedirectlyorindirectlyfromthemassmarket.
The social impact resulting from the permanent eli-
mination of a large fraction of the jobs held by average
people would obviously be dramatic. History showsthat
onceunemploymentreachesacertainlevel,theveryfoun-
dationsofdemocraticsocietymaybethreatened.During
theGreatDepression,unemploymentreached25percent
in the United States. Joseph P. Kennedy, thefounderof
the Kennedy dynasty, famously said that during this pe-
riod,hewouldhavegladlygivenuphalfofeverythinghe
had, if he couldhave been certain of retaining theother
halfofhisfortuneundertheruleoflaw.Clearly,therisks
are very real, not just for the bulk of people whose in-

comesmaybethreatened,butalsoforthosewealthyindi-
vidualswhomaybelikelytoresisttheideaofgovernment
policiesthatincludemoreprogressivetaxation.
Mypurposeinwritingthisbookistotrytogivethese
issues morevisibilityin thehope that aconstructivedis-
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cussionanddebatecanoccur.Perhapstheargumentsthat
I have presented here will turn out to be wrong. But if
theyareevenpartiallycorrect,thenwecannotaffordtobe
takenbysurprise;itwillbeessentialtohaveaplan.
Inthenextchapter,wewillfastforwardtoapointin
thefuturewherethetrendtowardwidespreadjobautoma-
tionhasbecomeclear.Oncethishappens,therewillreally
benochoiceexcepttocomeupwithsomemodifications
to our system so that the free market can continue to
functionandthrive.


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Chapter 4
TRANSITION



Inthepreviouschaptersofthis book,wehaveseenthat
machineautomationislikelytosomedayeliminateasub-

stantialfractionofthejobsnowperformedbypeople.Au-
tomationispoisedtoadvanceontwobroadfronts.First,
machinesandrobotswillincreasinglytakeovertheroutine
jobsinfactories,retailstores,officesandwarehousesthat
arenowheldbyworkers.
Second,theexistingtrendtowardtechnology-enabled
self-servicewillaccelerate.Wealreadyseethistrendwith
ATMs, automated checkout aisles, online banking, and
automated telephone answering systems. All of these
representareaswheremachinesallowconsumerstoinde-
pendently perform tasks that once required the involve-
mentofhumanworkers.Inthefuture,wecanexpectthat
thistrendwillbeextendedtoincludecellphonesandoth-
ermobiledevicessothatconsumerswillbeableperform
tasksandgetautomatedassistancealmostanywhere.
Inaddition,thedrivetowardself-servicewillalsooc-
cur within businesses. New automation tools will enable
managersinbothlargecorporationsandsmallbusinesses
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todirectlydothejobsandperformtheanalysisthatonce
requiredhumanemployees.
Aswesawinthelastchapter,ifthesetrendsbecome
unambiguousandareallowedtoimpactinanuncontrolled
manner,theresultislikelytobeasevereeconomicdown-
turnasworkers(whoarealsoconsumers)begintofearfor
their long-term employment prospects. In Chapter 3, I
proposedsomeinitiativeswhichmighthelptostabilizethe
situationanddelaytheonsetofthisscenario;however,we

cannotescapethefactthattechnologicaladvanceisrelent-
lessandthatfreemarketincentiveswillcontinuetopush
theprivatesectortowardtheeliminationofjobs.Oncewe
accept the fact that a large fractionofjobswill beauto-
matedinthefuture,thenwereallyhavenochoicebutto
alsoaccepttherealitythatoureconomicsystem,asitex-
iststoday,cannotcontinuetofunctionindefinitelywithout
modification.
Inthischapter,wearegoingtofastforwardfarinto
thefuture;wewillimagineatimewhenatleastthreequar-
tersofthejobswhichexistinourcurrenteconomyhave
been permanently automated away. In other words, the
unemploymentratewillbeatleast75percent—analmost
unimaginably high level—and there will be no realistic
hope that more jobs will be created in the future. Is it
possibletohaveaprosperouseconomyandacivilsociety
insuchascenario?
Ifwecandeviseasystemthatwouldworkinsuchan
admittedlyextremesituation,thenweshouldalsobeable
to figure out a way to gradually transition into that new
system,sothatwecanmaintaineconomicstabilityasau-
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tomationadvancesinthecomingyearsanddecades.To-
wardthatend,let’sbeginbylookingatthebasicelements
ofourexistingfreemarketeconomy.
The Basis of the Free Market Economy:
Incentives
Thefreemarketeconomyisanaturalsystemthatpushes

consumers, businesses, investors and workers to act in
waysthatultimatelypropelsocietyasawholetowardad-
vancementandgreaterprosperity.Inotherwords,aseach
ofuspursuesourownself-interest,collectivelywe move
everyoneforward.Throughthelogicofthemarket,these
collective actions automatically allocate resources in the
mostefficientwaysothateconomicoutputismaximized.
This, ofcourse,is the“invisible hand” that Adam Smith
spokeof.
Wecandividethelogicofthefreemarketintothree
broadsetsofincentives:
1. Individual consumers act to find the best values for
products and services. In other words, consumers
shop around. No one wants to overpay, and no one
wantstoendupwithaninferiorproduct.
2. Theownersofbusinessesandcapitalcompetetomax-
imize profits by providing the best possible value to
consumers. As they do so, they invest in ways that
driveinnovationandcreatenewproducts,servicesand
industries.
3. Individualworkersacttomaximizetheirincome.They
seek the best possible job, invest in education and
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trainingtoenhancetheir futurecareerprospects,and
dotheircurrentjobtothebestoftheirability.
Historically, these three incentives have worked in
concerttodrivesocietytowardeverincreasingprosperity.
Aswehaveseen,the problemwefaceifautomationeli-

minatesalargefractionofthejobsheldbyworkersisthat
consumers and workers are the same individuals. Without
reliableincomefromemployment,therewillnolongerbe
a critical mass of viable consumers. And it is consumers
whoultimatelydrivethemassmarketeconomy.Without
the expectation of sufficient market demand, no rational
businessowner willinvest in increased production orin-
novation.
Preserving the Market
Clearly,inordertopreservethemassmarketinalargely
automatedeconomy,weneedtoprovideanalternativeto
jobs.Weneedamechanismthatcangetareliableincome
streamintothehandsofconsumers.Thisofcourse,isa
propositionthatwillbeverydifficultformostofustoac-
cept;theideathatwemustworkforalivingisoneofour
most basic core values. The current alternatives to job-
basedincome,suchasunemploymentinsuranceorwelfare
payments,comewithhighlynegativeconnotationsandare
purposelydesignedto provideminimalsupport so that a
disincentivetoworkisnotestablished.
Our current value system celebrates the importance
of our labor. We believe that work is essential and that
consumption is a privilege that derives from that work.
However, this is a belief system that is fundamentally
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based on the historical reality that human labor is indis-
pensabletotheproductionprocess.Whathappenswhen
technologyreachesthepointwheremosthumanlaboris

nolongeressential?
At that point, we will have to undergo a quantum
shift in our value system. In order to preserve the free
marketsystem,wewillhavetocometotherealizationthat
while work (at least for most people) may no longer be
essential,broad-basedconsumptionis
essential.Inthedeveloped
world, our mass market economy has grown farbeyond
what isrequired to simplyprovideindividuals withbasic
necessities.Inordertomaintaintheglobaleconomy and
driveittowardfuturegrowth,wemust havea verylarge
numberofconsumerswithadequatepurchasingpower—
allofwhomhaveconfidenceintheirfuturecontinuityof
income. Without that critical mass of viable consumers,
economicdeclineismathematicallyinescapable.
There is really no way to envision how the private
sectorcansolvethisproblem.Thereissimplynorealal-
ternativeexceptforthegovernmenttoprovidesometype
ofincomemechanismforconsumers.Whilethisideawill
initially,ofcourse,bevehementlyopposed,Ibelievethat
intime,thiswillhavetobeacceptedasabasicfunctionof
government.
Considertheviewpointofaneconomicallyconserva-
tiveorlibertarianthinker.Thispersonislikelytoadvocate
thesmallestpossiblegovernmentandamarket thatisas
free and unregulated as possible. Nonetheless, this per-
son—if he or she is reasonable—is veryunlikelyto pro-
pose eliminating government entirely because he or she
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understandsthatthereisonecorefunctionofgovernment
whichis critical totheoperation of thefree market:the
protectionofpropertyrights.Thegovernmentmustmain-
tainanationaldefense,apoliceforceandajudicialsystem,
and it must enforce and protect clearlydefined rightsto
own and trade property. Without these governmental
functions, the free market could not operate effectively
andcivilsocietywoulderodeintojunglewarfare.
Inafuture,largelyautomatedeconomy,thepreserva-
tion of robust market demand by providing an income
streamtoindividualconsumerswillalsohavetobecomea
corefunctionofgovernment.Thisisanideathatwillno
doubt initially elicit derisionor outrage. In the long run,
however,Ibelievethattherewillsimplybenoalternative.
Market demand powers our economy. No rational
businessownerwillinvestinincreased productionin the
absence of an expectation of demand. In the economic
environment of 2009, consumerism is very much out of
fashion,andthisisreallynotagoodthing.Themediais
repletewithstories abouthow Americanshavegoneout
andspenttoomuchonbigscreenTVs.Thesestoriesmiss
thepoint.Whiletherewillalwaysbesomeindividualswho
act irresponsibly, the overall problem is really not that
Americanshavespenttoomuch.Theproblemisthattheir
spendinghasbeensustainedbyborrowingratherthanby
growthinrealincome.Andthisisbecause,formostaver-
agepeople,therehasbeenlittleornogrowthinincome,
while at the same time, health care costs have been ex-
ploding.

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Inthelongrun,onlysustainedconsumerspendingcan
turn the economy around and return us to economic
growth.Everythingproducedbyoureconomyisultimate-
lyconsumed by individual people; we cannot have long-
termprosperityunlessenormousnumbersofpeoplehave
sufficient income—and sufficient confidence in the fu-
ture—topowersustainedconsumption.
Again,conservativeeconomicthinkersmayreflexive-
lyobjecttothisview.Conservativestendtoemphasizethe
importance of production (or the “supply side”) in the
natural cycle that occurs between production and con-
sumption. Conservatives generally favor low taxes and
minimumregulationofproducersintheexpectationthat
thiswillresultinincreasedeconomicactivityandjobcrea-
tion, which will then lead to strong consumer demand.
Theproblemwiththatwayofthinking,ofcourse,isthat,
in an increasingly automated economy, the job creation
willnot occur. Consumers will have littleopportunity to
participateintheproductionprocessasworkersand will
loseaccesstothewagesthatsustainthem.Intheabsence
ofanalternateincomemechanism,acollapseinconsumer
spendingmustbetheinevitableresult.
Recapturing Wages
Aswebegin toenvisionhowitmightbepossibletode-
signanalternativeincomestreamforconsumers,let’sbe-
ginbyconsideringhowthewagesfromajobthathasbeen
automatedawaycouldberecapturedbythe government.

Whenabusinesseliminatesajobastheresultofautoma-
tion technology, the income that was previously paid to
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that worker does not simply vaporize. In fact, it is redi-
rectedintwoways:(1)Someoftheincomeaccruestothe
ownersandmanagersofthebusiness,and(2)someofthe
income is redirected to the consumers of the business’s
productsorservicesintheformoflowerprices.
Therefore, the government can recapture the wages
from the automated job with some combination of two
types of taxes. First, higher business taxes, capital gains
taxesandmoreprogressiveincometaxesonwealthyindi-
vidualscanbeusedtorecapture the incomethatgoesto
thebusiness’sowners.Thegrossmargin taxproposedin
the previouschapter or a carbontax might also provide
effectivemechanismsforrecapturingsomeofthisincome.
Secondly,someformofconsumptiontaxcouldbeusedto
recapture that portion of the lost wages that results in
lowerprices.Thisconsumptiontaxmightbeasimplesales
tax
*
oravalueaddedtax(VAT)similartotheonesalready
popularinEurope.
Once again, these ideas will probably be met with
strongresistance.Wealthyindividualsandbusinessowners
willinitiallybeveryunhappy.However,abusinessmanag-
er in the future will ultimately have to face two alterna-
tives:(1)Anewformoftaxationdesignedtoredirectin-

cometoconsumers,or(2)catastrophicallyfallingdemand.
Thisisreallynotadifficultchoice.Inanautomatedecon-
omy, low tax rates and robust demand are going to be
fundamentally incompatible. In the absence of the jobs


*
Ifasalestaxisuseditshouldcertainlybeaninternaltaxthatisin-
corporatedintothetotalprice(similartogasolinetaxes)ratherthanan
externaltaxthatistackedontothetotal(likestatesalestaxes).
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thatcurrentlypowerconsumers,somenewformoftaxa-
tion will be essential for creating an income mechanism
thatleadstosustaineddemandforproductsandservices.
ItisveryimportanttonotethatIamnotadvocating
taxessohighthatall value from technological progress is
recaptured. As technology advances, it provides benefits
farbeyond simplyeliminating jobs. Innovationresults in
new products and services and creates entirely new and
very lucrative markets.Considerthe caseofafullyauto-
mated factory. Astechnology progresses, thefactorywill
continue to become even more efficient and produce
products at lower prices, even though all the jobs have
already been eliminated. The taxes I have proposed are
intendedonlytorecapturethe wages from jobs that have
beenautomatedaway.Inotherwords,thehighertaxeswill
simplyreplacethewagesthatwouldhavebeenpaidinthe
absence of automation. Beyond this, the owners of the

businesswillcontinuetobenefitfromtheirinvestmentsin
improvedtechnology.Toseethis,considerthetablethat
follows.

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UnitCostBreakdownforaHypotheticalProductorService


Current
Cost
FutureCost

(nowage
recapture)
FutureCost

(withwage
recapture)
Cost of non-
executive wages
$40 $10 $10
Conventional
Taxes
$15 $15 $15
Special new taxes
to recapture wage

income

$0 $0 $30
Other Costs
$45 $35 $35
Total Unit Cost
$100

$60

$90


Thetableaboveoffersahypotheticalandadmittedly
simplisticexampleofaproductorservicethathasacur-
rent unitcost of$100.
*
Thetableshows that $40ofthis
currently represents wages paid to non-executive em-
ployees.Overtime,asautomationprogresses,theportion
of the unit cost allocated to wages falls to $10. Notice,
however, that the “other costs” category also falls. This
represents the cost benefits of advancing technology,
whicharedistinctfromtheeliminationofwages.Thegoal
shouldbetoimposeataxthatrecapturesthelostwages,
without also capturing the additional non-wage related
benefits of innovation. In this example, we have recap-
turedallofthelostwages.Inreality,wemightwanttoim-


*
Forsimplicity,Ihaveexpressedthisideaintermsofper-unitcost.In

practice, it would be better to base the wage recapture scheme on
wagesasapercentageoftotalrevenueforthebusiness.
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poseasomewhatlowertaxonbusinessesandthenusean
additionalconsumptiontaxtocapturetheremainingwage
income.Thisstrategywillensurethatthebusinesscontin-
uestoseeameaningfulincentivetoinnovate.
One approach to this problem might be to develop
historicalwageguidelinesforeachtypeofbusinessbased
on industry, business size, etc. As automation increases,
thewagerecapturetaxeswouldbegraduallyraisedsothat
thetotalofwagespaidandwagerecapturetaxesremained
relatively constant as a percentage of revenue over time.
The government would keep the revenues raised from
thesespecialtaxescompletelyseparatefromtherevenues
itusesforitsnormaloperations.Therevenuefromthese
taxes would then be used exclusively to replace income
fromlostwages.
Itwouldalsobepossibletodesignawagerecapture
schemewhichde-emphasizesdirecttaxesonbusinessand
reliesmoreonaconsumptiontax.Theproblemswiththis
arethatthetaxwouldneedtobeveryhighandwouldbe
regressive (it would fall most heavily on those with low
incomes). However, this could be addressed partly by
charging a lower tax rateon necessities and a higher tax
rate on luxury goods. It should also be combined with
moreprogressiveincometaxationonindividuals.Astrate-
gyrelyingmoreonaconsumptiontaxwouldhavethead-

vantageofnot making domestic producers less competi-
tive with their international counterparts. Any significant
consumption tax would have to be imposed equally on
Internetsalesandwouldrequirethecreationofamechan-
ism for insuring that taxes were paid on items being
Transition / 167

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shippedfromoverseas(otherwisesaleswouldsimplygra-
vitatetooffshoremerchants).Theconsumptiontaxwould
also either have to apply to services as well as tangible
products,orserviceproviderswouldneedtobesubjectto
adirectwagerecapturetax.
*

TheideasIampresentinghere,ofcourse,represent
onlyabasicframework.Thedetailsandthetradeoffsbe-
tweenvarioustypesandlevelsoftaxationwouldneedto
be worked out using extensive analysis and probably
throughcomputersimulationoftheeconomy.Obviously,
anyrealworldtaxesthatweimplementinordertorecap-
turetheincomefromautomatedjobswillendupdoingso
inanimperfectway.Wealsoknowthatgovernmenttends
to be inefficient and wasteful. However, that does not
changetherealityofthesituation.Sincegovernmentisthe
onlyentitythatcanimpose overallregulationandcollect
taxes,thereisnorealisticalternativetosomeformofgov-
ernmentinvolvement.
 Oneessentialprincipleofanysuchschemetore-
capturewageincomeisthattherevenues raisedmust be

kept separate. An absolute firewall should be established
between this special function of government and the
fundsusedforgeneralgovernmentoperation.Thisshould
bemadeeasierbythefactthatthefundswouldbeimme-
diatelydistributed to consumers; there would not be any
long-term fund that could be raided and used for other


*
 It might also be necessary tohave different tax rates for different
products or services based on labor content. For a service that re-
mainedlaborintensive,theratecouldbelowersincewageswereal-
readybeingpaid.Forahighlyautomatedservicethetaxratewouldbe
higher.
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purposes.Asecondimportantpointwecanmakeisthat,
eventually,this specialandseparategovernmentfunction
wouldsubsumemanyoftheactivitiesnowprovidedforby
other government programs. Welfare, unemployment in-
surance and even social security could ultimately be re-
placed by this new, separately managed,income scheme.
Thatwouldleaveafarsmallergovernmentcore.
Positive Aspects of Jobs
Whileitis conceptuallynot difficult toenvisionhowthe
government might recapture lost wages through special
taxes,itismuchhardertodesignaneffectivewaytodirect
thatincometoconsumersintheabsenceofjobs.Infact,
the incentives attached to jobs provide many benefits

beyond income, both to individuals and to society as a
whole:
 Jobs provide a useful occupation for our time.
Theyprovideindividualswithasenseofpurpose,
andtheyresultinamoreorderlyandcivilsociety.
 Jobs provide hope for advancement. Even those
workers in the lowest paid professions can hope
thattheywillsomedaybeaffordedabetteroppor-
tunity.Thepresenceofthishopeforthefutureis
animportantcomponentofstability—bothforan
individual’semotionalstateandforsocietyingen-
eral.Beliefinthepossibilityofabetterfutureisal-
soasignificantdriverofcurrentconsumption.
 Jobsmotivatepeopletoinvestineducation,train-
ingandotherformsofselfimprovement.Anindi-
vidual’sprimaryincentive forsuchan investment
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maybethepromiseofabettercareer,butboththe
individualandsocietyasawholederivemanyan-
cillarybenefits.
Clearly,ifweareto comeupwithanalternativein-
come mechanism, it is essential that these incentives
somehow be preserved.Thelack of these incentivesis a
primaryproblemwithcurrentwelfareprograms.Welfare,
asitiscurrentlyimplemented,providesfewincentivesfor
selfimprovementandlittlehopeforthefuture.Ittendsto
resultinapermanentunderclass,anditcertainlydoesnot
createthetypeofviableconsumersthatweneedtopower

theeconomyofthefuture.
The Power of Inequality
Theideaofincentivesiscloselytiedtotheconceptofin-
comeinequality.Inthisbook,Ihavemadethepointthat
extremeincomeconcentrationandinequalitywillultimate-
lyunderminetheviabilityofthemassmarket.However,it
isimportanttonotethattheotherextremealso presents
very serious problems. A program in which everyone is
provided with a relatively equal income—in return for
doingnothing—providesnomotivationforselfimprove-
ment,nosenseofself-worthandnohopeforabetterfu-
ture.Thisistheproblemwithexistingwelfareprograms.
Whatweneedthenisamechanismthatprovidesfor
unequal(butnotunfair)incomes.Weneedtosynthetically
recreatetherewardsandincentivesthatarecurrentlytied
tojobs.Theidealistoprovideunequalincomebutequal
opportunity, so that every individual can have a realistic
expectationofadvancinghisorherposition.Mostimpor-
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tantly,weneedtoensurethattheincentivesbuiltintothe
system motivateindividualsto dowhatis bestforthem-
selvesandforsocietyasawhole.
Where the Free Market Fails: Externalities
Whilethereislittlequestionthatthefreemarketoffersthe
bestoverallefficiencyofanyknowneconomicsystem,itis
nonetheless an imperfect system. Perhaps the biggest
shortcomingofthefreemarketeconomyisintheareaof
externalities.Anexternalityisacost(orbenefit)whichfalls

onsocietyasawhole,butwhichisnotincorporatedinto
theindividualincentivesfacedbybusinessesandindividu-
als.
Aclassicexampleofanexternalityisindustrialpollu-
tion. Intheabsence ofgovernment regulation, it costs a
factorynothingtosimplydumptoxicwasteintotheenvi-
ronment.Infact,thenaturaloperationofthefreemarket
would drive even environmentally conscious business
managerstopollutebecause,iftheydecidedtounilaterally
bear the extra costs of handling waste properly, they
wouldfindthemselvesatacompetitivedisadvantage.For
this reason, governments enforce regulations regarding
toxicwasteandpollution.
Themostsignificantexternalitythatsocietywillhave
todealwithinthecomingdecades is, ofcourse,climate
changebroughtonbyuncontrolledcarbonemissions.In
thenearfuture,wecanhopethatregulationsortaxeswill
increasinglybeimplementedtohelpaddressthisissue.
Ingeneral,governmentshavereasonablesuccessen-
forcing laws that help minimize negative externalities at
Transition / 171

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theindustrylevel,butitismuchhardertoeffectivelyad-
dressexternalitiesattheindividualconsumerlevel.Thisis
a huge problembecausethe day-to-daychoices madeby
billionsofpeoplethroughouttheworldobviouslyhavean
enormouscollectiveimpactontheenvironment.
Becauseyoucareabouttheenvironment,youmaybe
drawntotheideaofreplacingyourolder,fuelinefficient

carwitha newerhybridmodel.Whilethis maysaveyou
somemoneyongasoline,youwillquicklyrealizethatonce
youfactorinothercosts,suchasdepreciation,thetransac-
tionprobably does not make sense on a purely financial
basis. Infact, individual incentives for acting in environ-
mentally conscious ways are typically quite weak. While
publiceducationdoessucceedinmotivatingmanypeople
tomaketherightchoicesintermsofthecarstheydrive,
oradecisiontousepublictransit,orparticipationinrecy-
clingprograms,thereislittledoubtthatfarbetterresults
couldbeobtainediftheincentivesweresomehowstrong-
er.
Your income depends on your job, and so you are
sure to wake up in the morning and arrive at work on
time. That is a powerful incentive. What if your income
alsodependedtosomeextentonyourbehaviors relative
totheenvironment?Clearly,thatwouldcauseadramatic
readjustment in the priority that we all give to acting in
environmentallyresponsibleways.
While designing a systemthat replaces theideaofa
traditionaljobwithsomeothermechanismfordelivering
income to consumersis aseriouschallenge, wecannow
seethatitalsopresentsanenormousopportunity.Clearly,
THE LIGHTS IN THE TUNNEL / 172

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wewillwanttoincorporateincentivesthatdirectlyaddress
environmentalissues(andotherexternalities)intoournew
incomemechanism.
*


Creating a Virtual Job
Atthemostbasiclevel,ajobisessentiallyasetofincen-
tives.Asapersonactsaccordingtothoseincentives,heor
she performs work that is currently required in order to
produceproductsandservices.Intheeconomyofthefu-
ture, if that work is no longer required, we will need to
create“virtual”jobs.Inotherwords,peoplewillcontinue
to earn income by acting in accordance with incentives,
buttheiractionswillnotnecessarilyresultin“work”inthe
traditionalsense.
The income earned by individuals must be unequal
and dependent on each individual’ssuccess inacting ac-
cordingtotheestablishedincentives.Thiswillensurethat
people are motivated to act in ways that benefit them-
selvesaswellassocietyasawhole.Mostimportantly,this
systemwillgetareliablestreamofincomeintothehands
ofconsumers,andaswehaveseen,thatisabsolutelyes-
sentialinordertocreatesustaineddemandformassmar-
ket productsand servicesandtherefore drivetheecono-
my. If we can do that successfully, thenthe free market
economy can continue to operate and generate broad-
basedprosperityindefinitely.


*
Somepeoplemightobjecttotheideaofincorporatingenvironmen-
talincentivesintoincomeasgovernmentintrusion.Remember,how-
ever,weareonlytalkingaboutincomethatisprovidedbythegovern-
ment. Individuals with private sources of income would be free to

ignoretheincentives.
Transition / 173

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The obvious questions that arise next are: What
shouldtheseincentivesbe,andwhoshouldsetthem?The
basicincentivesshouldbefairlyobvious;wesimplyneed
tocombinethebestpositiveincentivesthatarecurrently
built into theidea ofa traditional job with additional in-
centivesthatdirectlyaddresstheexternalitiesthatourcur-
rentsystemoverlooks.Iwouldsuggestthattheincentives
shouldberoughlyasfollows:
Education
Themostimportantdeterminantofincomeshouldbethe
levelofeducationachieved.Individualswithmoreeduca-
tionshould earn more. A more educated populationhas
many benefits to society, including a lower crime rate,
greatercivicparticipation,amoreinformedelectorateand
amoreflourishingculturalenvironment.Inaddition,more
educatedindividualsarefarmorelikelytofindfulfillment
inafuturewheretraditionalworktakesupasmallerfrac-
tionofeachperson’stime.
While automation may eventually eliminate full-time
work opportunities for the bulk of thepopulation, there
willcontinuetobeaminorityofindividualswhohavethe
necessaryentrepreneurial skills and knowledgeto partici-
pate actively in driving technological advancement and
economic growth. These individuals will require a high
degreeofeducationandtraining.Byemphasizingtheidea
ofeducationforeveryone,wewillmaximizethenumberof

suchindividualsthatwillbecomeavailableand,therefore,
improve the prospects for continued advancement and
prosperity.
THE LIGHTS IN THE TUNNEL / 174

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Iwouldgofurtherandarguethat,inadditiontopro-
vidingincentivesforpursuingformaleducationaldegrees,
weshouldcreateaprogramthatmotivatespeopletorou-
tinelyacquireknowledgebyengagingincontinuingeduca-
tionprogramsorevensimplybyreading.Recentsurveys
haveshownthatthenumberofpeoplewhoregularlyread
books is in continuing decline. Studies have also shown
thatourpopulationis,inmanycases,disturbinglyignorant
of even the most basic knowledge. A recent National
ScienceFoundationsurveyshowedthat20percentofthe
U.S. population actually believes that the sun is in orbit
around theearth!
51
Likewise,too manyAmericanswould
probably be hard pressed to find Iraq or Afghanistan—
twocountriesinwhichweareactivelyengagedinwars—
onamapoftheworld.
Atthesametime,weseemtobemovingincreasingly
towardadirectdemocracymodelinwhichalargelyunin-
formedelectorateisgiveninfluenceoverdetailedgovern-
mentpolicy.InCalifornia,thisoccursliterallyintheform
ofballotinitiatives,butevenatthenationallevel,it hap-
penswhenpoliticiansadjusttheirpositionsbasedonopi-
nionpolls.

Thereisalsostrongevidencetosuggestthatwhilethe
Internet provides unprecedented access to information,
toomanyofus,especiallyamongtheyoungergeneration,
are failing to assimilate that information. The migration
towardasocietyinwhichalargepartoftheaverageper-
son’s knowledge of the world resides not in his or her
Transition / 175

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brain,butinonlineinformationsourceslikeWikipedia,is
dangerousandunacceptable.
*

Community and Civic Activities
Asecondsetofincentivesshouldbedesignedtomotivate
individuals to participate in activities that enhance com-
munity, civic and culturaldevelopment. Inhis book, The
End of Work, Jeremy Rifkin advocates the creation of a
“third sector” which would be focused on providing
community and social services, and this idea should cer-
tainlybeincorporatedintoourincentivescheme.Itislike-
lythatinthefuture,wemayseeamixofdirectincentive-
based income streams and traditional full or part-time
jobs.
As automation advances, the remaining traditional
jobs are likely to be those that require uniquely human
attributes. In the future, we will continue to need social
workers, community activists, health care workers, and
people who specialize in working with children. By em-
phasizingeducation,wewilllikelycreatemanytraditional

jobsforteachersatalllevels.


*
 Incentive incomes could be easily tied to the number of books a
personreads.Futuretechnologyshouldmakeitpossibleforanartifi-
cialintelligencealgorithmtoscanabookandinstantlycreateacom-
prehensiontest.Itis,ofcourse,easytolaughorsneerattheideathat
peopleshouldbepaidtoreadinsteadoftowork.But,asIhavetried
topointouthereagainandagain,ifwetransitionintoanautomated
economy,wewillhavetopaypeopletodosomething—orwewillhave
ageneralcollapseofconsumerdemand.Providingourcitizenswithan
incentive to read and become informed is really not a silly utopian
idea:itisultimatelyamatterofbasicnationalsecurity.
THE LIGHTS IN THE TUNNEL / 176

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Itisimportanttonotethatourneweconomicmodel
willnotinanywaypreventindividualswhowishtowork
and can find positions from doing so and earning addi-
tional income. We are simply recognizing that there will
not be enoughof these jobsforeveryone,and thatthey
willnot,bythemselves,provideanadequateincomelevel
for the population. Income earned from traditional jobs
should, in general,beinadditiontoandindependentof,
theincentive-basedincomepaidbythegovernment.This
would ensure that a sufficient incentive exists to attract
workersintoareaswheretraditionalworkisstillrequired.
Journalism
Another area which is related to the idea of civic and

community involvement is professional journalism. The
framersoftheU.S.constitutionrecognizedthatthescru-
tinyofgovernmentprovidedbyafreepresswasessential
tofreedom, and theyacted to ensure that the press was
protectedfromgovernmenttyranny.
Theframerscouldnothaveanticipated,however,that
it would ultimately be the Internet, rather than govern-
ment,thatwouldbetheprimarythreattotheexistenceof
independentjournalism.Whileitislikelythatthepresswill
continue to provide effective scrutiny of government at
the federal level, we already face a significant risk at the
city and local levels. Major cities throughout the United
States,whichusedtosupportcompetingnewspapers,are
nowservedbyonlyasinglepublication.InSanFrancisco,
the survival of the only major newspaper is currently at
severe risk. The existence of one or more credible and
professionalpublicationsthatshineacontinuouslighton
Transition / 177

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theactionsofgovernmentatalllevelsiscriticaltoeffec-
tivedemocracy,andourincentiveschemecouldrecognize
this by providing direct support to those who engage in
thisactivity.
The Environment and other Externalities
Finally,ourincentiveschememustincorporatetheideaof
externalities,andthemostimportantofthesewillbeenvi-
ronmental in nature. Individuals who make choices that
arepositivefortheenvironmentshouldbepaidmore.By
tyingincomedirectlytoenvironmentallyconsciousactions

wewouldcreatepowerfulincentivesthatwouldminimize
ourcollectivenegativeimpactontheplanet.Byadopting
thisidea,wehavethepotentialtocreateasysteminwhich
economicprosperityisdirectlycoupledwithfavorableen-
vironmental outcomes. In addition, the system would be
flexibleenoughsothatitcouldberefinedtoaddresssig-
nificantexternalitiesthatmightariseinthefuture.
*



*
Anotherobviouspossibilityforincomeincentivesispersonalhealth.
There are a number of health issues, especially obesity, which have
enormouscostsfor bothindividualsandsociety.This,however, is a
very tricky area. A simple approach might be to just pay higher in-
comes to people withina healthy weight range, but this wouldraise
legitimate fairness and discrimination concerns. Another possibility
wouldbetocreateincentivesforhealthybehaviors,butthiswouldbe
difficulttotrackandverify.Ingeneral,health-basedincentiveswould
requirethegovernmenttohaveaccesstoandtrackalotofveryper-
sonalinformation,andthiswouldlikelyraiseprivacyconcernsandthe
specter of Big Brother. For these reasons, I have relegated health-
basedincentivestoafootnote,butthismaybeafertileareaforfur-
therthoughtanddiscussion.